UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION
SECURITIES ACT OF 1933
Release No. 7743 / September 27, 1999
SECURITIES EXCHANGE ACT OF 1934
Release No. 41915 / September 27, 1999
File No. 3-10032
In the Matter of : ORDER INSTITUTING PUBLIC
GARY A. RUE, : PROCEEDING, MAKING
: FINDINGS AND ISSUING A
Respondent. : CEASE-AND-DESIST ORDER
The Securities and Exchange Commission ("Commission") deems it appropriate that a public cease-and-desist proceeding pursuant to Section 8A of the Securities Act of 1933 ("Securities Act") and Section 21C of the Securities Exchange Act of 1934 ("Exchange Act") be instituted against respondent Gary A. Rue ("Rue").
In anticipation of the institution of this cease-and-desist proceeding, Rue has submitted an Offer of Settlement ("Offer"), which the Commission has determined to accept. Solely for the purpose of this proceeding and any other proceeding brought by or on behalf of the Commission, or in which the Commission is a party, and without admitting or denying the findings contained herein, except that Rue admits the jurisdiction of the Commission over him and over the subject matter of this proceeding, Rue consents to the entry of this Order Instituting Public Cease-and-Desist Proceeding, Making Findings and Issuing a Cease-and-Desist Order ("Order") set forth below.
Accordingly, IT IS ORDERED that a proceeding pursuant to Section 8A of the Securities Act and Section 21C of the Exchange Act be, and hereby is, instituted.
On the basis of this Order and Rue's Offer, the Commission finds that:
Rue, age 42, resides in Hemet, California. From May to September 1997, he was a salesperson for Kellin Investment Corporation ("Kellin"). Prior to May 1997, Rue was a mutual fund salesperson with a broker-dealer registered with the Commission.
B . FACTS
1. From May to September 1997, Rue sold securities offered by Kellin, a Colorado corporation located in Temecula, California. From April to September 1997, Kellin offered and sold securities in the form of notes typically offering returns of 2% per month, raising approximately $4.1 million from about 58 investors in several states. The securities were not registered with the Commission.1
2. Rue raised approximately $2.5 million from about 33 investors through his sales of the Kellin notes. He offered and sold the notes by soliciting prospective investors and providing them with various documents in connection with their investments, including an agreement, correspondence, new account forms and account statements. He also signed most of the agreements provided to his investors, which set forth the terms of the investments. Rue received compensation for his sales in the form of commissions from Kellin. While he was selling the securities, Rue was not associated with a broker-dealer registered with the Commission.
C. LEGAL ANALYSIS
1. Sections 5(a) and 5(c) of the Securities Act prohibit the offer or sale of securities unless the securities are registered with the Commission, or are exempt from registration. Rue, by selling the securities offered by Kellin, directly or indirectly, through the use of the means or instruments of transportation or communication in interstate commerce or the mails, offered to sell or sold securities, in the form of notes, or, directly or indirectly, carried or caused such securities to be carried through the mails or in interstate commerce, for the purpose of sale or delivery after sale. No registration statement has been filed with the Commission or has been in effect with respect to these securities, and the securities are not exempt from registration. By reason of the foregoing, Rue violated Sections 5(a) and 5(c) of the Securities Act.
2. Section 15(a) of the Exchange Act requires an individual or entity that effects securities transactions to be registered with the Commission as a broker-dealer or associated with a registered broker-dealer, subject to certain exemptions from registration. Rue, by selling the securities offered by Kellin, directly or indirectly, made use of the mails and other means or instrumentalities of interstate commerce to effect transactions in securities, without being registered as a broker or dealer pursuant to Section 15(b) of the Exchange Act, or associated with a registered broker-dealer. By reason of the foregoing, Rue violated Section 15(a) of the Exchange Act.
Based on the foregoing, the Commission deems it appropriate to accept the Offer submitted by Rue.
Accordingly, IT IS HEREBY ORDERED that, pursuant to Section 8A of the Securities Act and Section 21C of the Exchange Act, respondent Rue cease and desist from committing or causing any violation and any future violation of Sections 5(a) and 5(c) of the Securities Act and Section 15(a) of the Exchange Act.
By the Commission.
Jonathan G. Katz
--The Commission previously filed a civil injunctive action against Kellin and its principal, Orlando R. Landa ("Landa"), alleging violations of the antifraud and securities registration provisions of the federal securities laws. SEC v. Kellin Investment Corp. and Orlando R. Landa, Civil Action No. 98-7153 ABC (RCx) (C.D. Cal.). In addition, the Commission previously instituted an administrative proceeding against Landa and barred him from association with any broker, dealer, investment adviser, investment company or municipal securities dealer. In the Matter of Orlando R. Landa, Advisers Act Release No. 1753 (Sept. 22, 1998).